Crisis in Neoliberalism or Crisis of Neoliberalism?
Abstract
This rather perceptive assessment of the implications of the current crisis for the United Kingdom (and a good many other countries) is more candid and insightful than the twaddle of many mainstream journalists, economists and politicians, who proclaim the virtues of the ‘free market’ while blaming an unholy coalition of unhinged bankers, shifty borrowers and incompetent regulators for the disaster. In order to save neoliberalism from itself, the free marketeers have nationalized some of the largest financial institutions in the world, socialized financial market risks and pumped huge amounts of public money into the economy. The rhetorical gyrations justifying this frenzy have been ideological in the worst possible sense: they are deliberately misleading representations of reality, concocted to confuse the audience and stultify the opposition. In contrast, Marxian assessments of the crisis, being grounded upon the realities of accumulation and located within systemic analyses of the class relations under neoliberalism, suggest that this is not a crisis of (de)regulation but, instead, a systemic crisis in neoliberal capitalism. It is not, yet, a crisis of neoliberalism.
Neoliberalism is the mode of existence of contemporary capitalism. This system of accumulation emerged gradually, since the mid-1970s, in response to the transformation of the conditions of accumulation accompanying the disarticulation of the Keynesian-social democratic consensus, the paralysis of developmentalism and the implosion of the Soviet bloc. In essence, neoliberalism is based on the systematic use of state power, under the ideological guise of ‘non-intervention’, to impose a hegemonic project of recomposition of the rule of capital at five levels: domestic resource allocation, international economic integration, the reproduction of the state, ideology, and the reproduction of the working class. These are summarily described below in order to locate the contradictions leading to the current crisis.
Even before the current crisis, the notion that finance mobilises and allocates resources efficiently, drastically reduces systemic risks and brings significant productivity gains for the economy as a whole was untenable. Not only did the expected acceleration of growth through financial and capital account liberalization fail to materialise in most countries but, instead, finance-induced crises have become more frequent. Conversely, the growth accelerations in the age of neoliberalism have been largely unrelated either to changes in financial sector regulations or capital account liberalization. An alternative interpretation is more plausible: regardless of these limitations, financialization plays a pivotal role in contemporary capitalism because it supports the transnationalization of production, facilitates the concentration of income and wealth and supports the political hegemony of neoliberalism through continuing threats of capital flight. The power of finance has become especially evident during the current crisis, when several governments were compelled to rescue large institutions and, in some cases, entire financial systems at huge cost to the public. Even more strikingly, these revived institutions immediately started demanding budget cuts because of the alleged ‘unsustainability’ of the fiscal position of states that, nominally, ‘own’ some of the largest banks in the land. Never in economic history has so much trouble and expense been rewarded with such effrontery.
Neoliberalism is the mode of existence of contemporary capitalism. This system of accumulation emerged gradually, since the mid-1970s, in response to the transformation of the conditions of accumulation accompanying the disarticulation of the Keynesian-social democratic consensus, the paralysis of developmentalism and the implosion of the Soviet bloc. In essence, neoliberalism is based on the systematic use of state power, under the ideological guise of ‘non-intervention’, to impose a hegemonic project of recomposition of the rule of capital at five levels: domestic resource allocation, international economic integration, the reproduction of the state, ideology, and the reproduction of the working class. These are summarily described below in order to locate the contradictions leading to the current crisis.
Even before the current crisis, the notion that finance mobilises and allocates resources efficiently, drastically reduces systemic risks and brings significant productivity gains for the economy as a whole was untenable. Not only did the expected acceleration of growth through financial and capital account liberalization fail to materialise in most countries but, instead, finance-induced crises have become more frequent. Conversely, the growth accelerations in the age of neoliberalism have been largely unrelated either to changes in financial sector regulations or capital account liberalization. An alternative interpretation is more plausible: regardless of these limitations, financialization plays a pivotal role in contemporary capitalism because it supports the transnationalization of production, facilitates the concentration of income and wealth and supports the political hegemony of neoliberalism through continuing threats of capital flight. The power of finance has become especially evident during the current crisis, when several governments were compelled to rescue large institutions and, in some cases, entire financial systems at huge cost to the public. Even more strikingly, these revived institutions immediately started demanding budget cuts because of the alleged ‘unsustainability’ of the fiscal position of states that, nominally, ‘own’ some of the largest banks in the land. Never in economic history has so much trouble and expense been rewarded with such effrontery.
